Chapter 12.4, Problem 31E

(a)

To determine

To find whether the claim made by Magic Soft is accurate or not.

Answer to Problem 31E

No, the claim is incorrect.

Explanation of Solution

Given:

The proposal claims that the company will generate $\$3.3$ million for the local economy by the $\$1$ million salaries that will be paid. The city council estimates that $70\%$ of the salaries will be spent in the local community and $70\%$ of the money will again be spent in the community and so on.

Calculation:

The claim is incorrect because it is not possible to generate $\$3.3$ million for the local economy.

It is very large as margin given is $\$3$ million.

(b)

To determine

To find the correct amount generated by the local economy.

Answer to Problem 31E

  $\$2.3$ Million.

Explanation of Solution

Given:

The proposal claims that the company will generate $\$3.3$ million for the local economy by the $\$1$ million salaries that will be paid. The city council estimates that $70\%$ of the salaries will be spent in the local community and $70\%$ of the money will again be spent in the community and so on.

Calculation:

The correct estimate will be $\$2.3$ which is visible from the margin.

  $\begin{array}{l}1+0.7+(1.07)\times 0.7\\ \approx \$2.3\end{array}$